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By Matteo Rosemin
PARIS (Reuters) – Paris’s La Defense business district is betting that modernizing more than 300,000 square meters (3.2 million square feet) of offices into greener, more flexible workspaces will attract companies again and ease record-high vacancy rates.
With brutalist architecture and modern skyscrapers dominating the skyline to the west of the Arc de Triomphe, La Défense is the largest purpose-built business district in Europe. As in other city districts, offices have fallen empty during the pandemic and deals have collapsed. The vacancy rate has risen to more than 15% from less than 10% before the pandemic, far higher than the 2% vacancy rate in central Paris, according to estate agents.
Many of its towers are old and environmentally unfriendly, but it would be too expensive to demolish or convert most of them to other uses.
The head of Paris La Defense, the public body that manages the area, told Reuters the plan is to renovate the area in the next few years for tenants who want less space but more green. The plan will start with an area of 300,000 square metres, roughly a tenth of the area of the entire La Défense area.
One attraction is that average rents of around €550 ($588.61) per square meter are half those in the undersupplied center of Paris, agents estimate. Before the pandemic, the central areas were around 40% more expensive than La Défense.
There are initial signs of improving demand. Vacancy rates have fallen from a record high of about 16% last year to 15% in early 2024.
French IT services company Sopra Steria moved into eco-friendly offices in a 1970s building that was remodeled two years ago. It now features an interior street filled with Parisian-style restaurants.
“If you want to attract the best talent, you have to have very modern, very functional buildings that facilitate teamwork,” Sopra Steria CEO Cyril Malarge told Reuters. [people] I want to stay in the office as long as possible.
It will not be easy to fill the vast offices.
Newer buildings remain easier to let than older sites, said Aymeric Loro, an executive at estate agency Savills, citing the rapid letting of Unibail-Rodamco-Westfield’s (URW) Trinity Tower.
Some large projects have been cancelled. URW announced in February that it had halted its planned twin tower project, The Sisters.
Upcoming early elections in France could further shake confidence if they result in a far-right, Eurosceptic government.
“There are fewer big companies taking on leasing,” Savills’ Lero said.
“But it’s not as bad as it sounds,” he added, as tenants today want high-end buildings with “a lot of inventory.” [central] Paris is not putting on a “show” on a large scale.
urban garden
The concept of La Defense, which is now home to companies including Vinci and Societe Generale (OTC:), dates back to the 1950s when plans were drawn up for a commercial district to replace the area’s dilapidated housing and small factories. The first skyscraper appeared in 1966. It was followed by a subway, shopping malls and the massive Coeur Defense office complex.
Supporters say La Defense has survived previous downturns and can do so again.
Paris La Defense is now selecting real estate projects based on their energy and environmental credentials and is transforming the main concrete public square into a five-hectare urban park that will open in 2027.
Low-carbon and some renewable energy is used to meet part of local energy needs, and building management systems automatically turn off office lights at night and maintain temperature control.
“We started from a living model that consumes a lot of energy and performs very single function,” Paris La Defense CEO Pierre-Yves Joyce told Reuters from his office overlooking the area.
“Despite what people might say, our ideas are still very rational, very adaptable to the needs of businesses, and we can accommodate both large and small companies,” he said.
This gives it an advantage over central Paris where the buildings are smaller, many of them dating from the 19th century and made of brick, limiting the use of more energy-efficient building materials.
La Defense will soon be home to France’s tallest skyscraper, the 242-meter-tall The Link, which will open next year to house long-time La Defense resident TotalEnergies (EPA:).
Experts estimate that the cost of renovating 300,000 square meters of offices to comply with modern green standards will reach hundreds of millions of euros, and this cost will mostly be borne by large developers such as URW and Vinci.
To attract younger workers and businesses, developers are building more apartments and converting some older buildings into student housing or trendy hotels.
This is similar to efforts being made in other cities affected by the economic slowdown, such as Canary Wharf in London.
The challenge facing La Défense now is to meet the needs of small businesses and larger companies that want less space. Luxury collections dry (EPA:) And Christian Dior of LVMH, for example, recently moved parts of their back offices there.
Typical buildings in the La Défense neighborhood were occupied by one or two companies, but that number could rise to 10 to 15 companies, said Yannis Di Francesco, director of real estate agency JLL France.
“It’s a completely different way of marketing to the way we’re used to, and by the way, it takes a little longer, because you have more contracts to sign,” he added.
($1 = 0.9344 euros)
